JOLLIBEE Foods Corp. (JFC) said that the acquisition cost for a 40 percent stake of US-based burger joint Smashburger Master LLC has increased more than tenfold to $100.25 million due to the US firm’s higher than estimated actual level of cash.
In a disclosure to the Philippine Stock Exchange on Thursday, JFC said that its acquisition price of 40 percent of Smashburger has increased from the original agreed purchase price of $99.47 million to $100.25 million, or a difference of more than $777,000.
“The purchase price adjustment, as validated by JFC’s accounting and tax advisor for said transaction, was mainly attributable to Master’s higher than estimated actual level of cash,” the company said.
Jollibee had earlier estimated Smashburger to have an enterprise value of $335 million and a $248 million equity value. The local fast food giant has the option to buy the entire company in the coming years.
Jollibee said that it will finance the acquisition from its cash reserves and partly from 10-year borrowing.
The company intends to buy out the entire Smashburger since under the agreement, its US unit, Be Good Inc. will purchase an additional 35 percent of the burger joint between 2018 and 2021 and the remaining 25 percent between 2019 at the earliest and 2026 at the latest.
“The purchase price for the remaining 60 percent will be based on the achievement of certain financial performance targets agreed between BGI and Master [Smashburger],” JFC said during the fourth quarter of last year.
Chairman Tony Tan Caktiong earlier said JFC has earmarked $1 billion for US acquisitions as the company expands from its traditional market of serving overseas
Filipinos in the world’s biggest economy.
Jollibee has established a footprint in the US where it has 87 fast food stores mainly serving Filipino communities.
Its flagship Jollibee fast food chain has 32 outlets; Red Ribbon, 33; Chowking, 19; and Jinja, three. System-wide sales in the US currently accounts for 5.0 percent of JFC’s worldwide system sales, the company said.
Smashburger, with headquarters in Denver, Colorado, has 339 restaurants –184 company-owned and 155 franchised — worldwide in 35 states in the US and seven foreign markets.